HR AUDIT METHODOLOGY

Dr. Deepak Sharma,

G. H. Raisoni Institute of Business Management, Jalgaon 9860759666, Email-
dssharma12@rediffmail.com
ABSTRACT

The chronological role of Human Resources has altered vividly since its setting up in the early
2000. Which started as a mainly clerical function is now a strategic collaborator in planning and
attaining organizational policies and goals. Now a day’s business environment puts the
responsibility on the HR department to accept the daily upcoming challenge of doing more with
less, while contributing worth in the direction of business achievement to objectives. Human
resources also has to focus on the rapidly shifting conditions affecting the type of employees
required and their changing needs, so the function requires flexible and knowledgeable
practitioners to be work on. HR strategic planning has become a primary element of doing
business and it is vital that human resource professionals be equally professionals in the field and
competent business persons.
HR Audit means the systematic verification of job analysis and design, recruitment and
selection, introduction and position, preparing and improvement, execution examination and
occupation assessment, representative and official compensation, inspiration and spirit,
participative administration, correspondence, welfare and government managed savings,
wellbeing and wellbeing, mechanical relations, exchange unionism, and question and their
determination. HR review is particularly valuable to accomplish the hierarchical objective and
furthermore is a key instrument which surveys the adequacy of HR elements of an association.

Keywords: - Audit, Job Analysis, Remuneration, welfare & social security.

I. INTRODUCTION

Since 1994 a huge array of labour legislation has been promulgated that have placed a great deal
of pressure on employers to improve the standard of their people management policies, practices,
and procedures. A comprehensive audit of HR systems and procedures needs to go beyond the
‘check and tick/inspection’ level. Basic financial ratios/scorecard measures appropriate for a staff
function like HR need to be put in place to audit the efficiency of the various functions

An HR audit is much like an annual health check. It can play out a similar capacity for the
association. A review is a methods by which an association can quantify where it right now
stands and figure out what it needs to achieve to enhance its HR capacities. It includes
deliberately exploring all parts of HR, normally in an agenda form, guaranteeing that the
administration directions and friends strategies are being clung to. The way to a review is to
recollect that it is an instrument to find and not to test. There will dependably be opportunity to
get better in each association.

Auditing includes the normal and orderly examination of hierarchical practices and achievements
vis-a-by means of authoritative destinations, organization arrangements, lawful necessities, as
well as expert models. Compelling reviews pinpoint the holes between "what is" and "what
ought to be" or "what could be." By evacuating or diminishing the extent of the holes, an
association can increment legitimate consistence, guarantee conformance to set up proficient
models, and additionally add to the quality change process.

In back and bookkeeping, reviewing is standard. Monetary reviews are frequently performed and
their discoveries submitted to senior administration and the directorate. The review ordinarily
includes a survey of an association's budgetary arrangements and practices against set up
bookkeeping principles and suggested rehearses. The yearly reports of open associations
incorporate an announcement from a free guaranteed open bookkeeping firm confirming that the
budgetary proclamations are honest and agree to typically acknowledged practices and
guidelines.

Partners depend on the autonomous money related review to supervise the guardian part of
administration and the top managerial staff. Bigger associations depend on interior examiners to
survey, consistently, the operational and money related execution of the working offices,
divisions, and backups.In human resources, auditing is not routine. There are no laws or
regulations requiring employers to engage an independent auditor to audit company policies and
practices. However, because of the complexity of state and federal labor laws and regulations, it
is common for employers to rely on their attorneys to review their human resources policies and
practices. Larger and more established organizations, moreover, have developed internal
guidelines for self-appraisal or independent review.

II. LITERATRURE REVIEW

 A Human Resources Audit is a comprehensive method (or means) to review current human

resources policies, procedures, documentation and systems to identify needs for improvement
and enhancement of the HR function as well as to assess compliance with ever-changing rules
and regulations.

The American Accounting Association’s Committee on Human Resource Accounting (1973) has

defined Human Resource Accounting as “the process of identifying and measuring data about
human resources and communicating this information to interested parties”. 

HRA, thus, not only involves measurement of all the costs/ investments associated with the
recruitment, placement, training and development of employees, but also the quantification of
the economic value of the people in an organization.

Flamholtz (1971) too has offered a similar definition for HRA. They define HRA as “the
measurement and reporting of the cost and value of people in organizational resources”.

Human Resource Audit is a comprehensive method of objective and systematic verification of

current practices, documentation, policies and procedures prevalent in the HR system of the
organization. An effective HR audit helps in identifying the need for improvement and
enhancement of the HR function. It also guides the organization in maintaining compliance with
ever-changing rules and regulations. HR audit, thus, helps in analyzing the gap between ‘what is
the current HR function’ and ‘what should be/could be the best possible HR function’ in the
organization.

According to Gray, “The primary objectives of personnel audit is to know how the various units
are functioning and how they have been able to meet the policies and guidelines which were
agreed upon; and to assist the rest of the organization by identifying the gaps between objectives
and results, for the end product of an evaluation should be to formulate plans fore corrective of
adjustment.”

Outline the need for personnel evaluation, Gordon states that a major objectives of personnel
management is to “improve productivity” of individual employees and thus increase
“organizational effectiveness “by better utilization of a firm’s human resources.

III. OBJECTIVES

 To ensure effective utilization of human resources

 To analysis cost value in order to acquisition, development, allocation and maintenance
of human resources.
 To focus on strategically development of human resources of organization in order to
achieve organizational goals.
 To learn systematic methodology to achieve appropriate audit outcome.

IV. HYPOTHESIS
 H0: Human resource audit can’t be performed through the measurement of the
effectiveness of the HR functions of an organization.
 Ha: Human resource audit can be performed through the measurement of the
effectiveness of the HR functions of an organization.

 H0:The Human Resource Management’s climate does not have an impact on employee
motivation, morale and job Satisfaction
 Ha: The Human Resource Management’s climate has an impact on employee motivation,
morale and job satisfaction

V. RESEARCH METHODOLOGY

Data Sources: Primary Data:

The Primary data was collected from Human Resource Management team and Finance
Manager. (The respondents by administering a structured questionnaire and also through
observations, interviews & discussion)

Secondary Data: Apart from various websites is not limited, Journals from Library,
Academic Reports, and Internet, used for this study.
 To identify the HR Audit Methodology sampling: Sample Population: There are total more
than 3000 companies in Jalgaon region from which we chosen 25 companies, beside with
their HR and Finance Managers in Jalgaon region.

Sample Size: Out of the total population, the sample taken among respondents from
companies HR managers & finance department randomly is 50.

Sampling Area: The research was conducted at MIDC, area of Jalgaon region.

Sample Method: The research was made by the survey in accordance to the convenience of
the Respondents. So the sample type is convenience sampling.

The HR Audit Methodology TOOLS USED FOR ANALYSIS Instrument: A structured

Questionnaire is used, and the type of questionnaire is target questions

Method: The research was conducted by using contact methods through Questionnaire,
Interview and Observation. The information of Audit methods was collected from the HR
mangers of various companies and finance department by visiting to their company

The HR Audit Methodology Data Analysis Techniques: The data is analyzed with” Simple
analysis technique”.

VI. SCOPE

Normally, nobody can gauge the state of mind of person and furthermore their issues are not
constrained to the HR office alone. So it is particularly expansive in nature. It covers the
accompanying HR regions:

 Audit of the whole HR work.

 Audit of administrative consistence of staff approaches, techniques and lawful
arrangements.
 Audit of business technique with respect to HR planning, staffing, IRs, compensation and
other HR exercises.
 Audit of the HR climate on employee motivation, morale and job satisfaction.

VII. DATA ANALYSIS WITH HYPOTHESIS TESTING

Q.1 Companies selected randomly are dividing into following criteria? What is your company
fits with.

Number of Employees
Sr. no Company Type
company working
1 LSI 03 500
2 MSI 06 200
3 SSI 08 50
4 Micro Scale 08 20
Q.2 how many (number of) employees are currently on staff?

Sr. No Companies Number of Employees

1 LSI 1500
2 MSI 1200
3 SSI 400
4 Micro Scale 160
TOTAL 3260

Q.3 how many employees are?

Sr. No. Criteria Total
a Regular/ Full time 1845
b Temporary/ Part time 1351
c Exempted 16
d Commission 48
TOTAL 3260

Q.4 What is the definition of a part-time employee (i.e., the maximum number of hours an
employee may work to be considered part-time)?
Hours of Part
Sr. no. no of respondents Result in %
time
1 2-3 hrs. 17 34
2 3-5hrs 27 54
3 Others 6 12
Total 50 100

Q.5 What is the minimum number of hours an employee has to work to be considered full-time?
Sr Hours of Full time no of respondents Result in %
1 8 hrs. 34 68
2 10 hrs 14 28
3 10 hrs. < 2 4
Total 50 100

Q.6 Is there a probationary period and if so, how long is the probationary period?
Sr Probationary period no of respondants Result in %
 1 3 months 6 12

2 6 months 36 72

3 1 year. 8 16

Total 50 100

Q.7 How long may an employee be temporary?

Employee on
Sr no of respondents Result in %
temporary Basis
1 3 months 34 68
2 6 months 14 28
3 1 year. 2 4
Total 50 100

Q.8 Does the company have a clear development or training plan/strategy?

Clear development or no of
Sr Result in %
training plan/strategy respondents
1 Yes 42 84
2 No 1 2
3 Can't Say 7 14
Total 50 100

Q.9 what was the total number of training hours in the previous year for all employees?
Training Hours for the Result in
Sr no of respondents
Employees %
1 Managerial 12 12 48
2 Supervisory 6 6 24
3 Staff 15 7 28
Total   25 100
:
Q.10 What kind of training is usually used by the organization?

Sr. no. Kinds of Training no of Result in %

 respondents
1 Formal classroom 2 8
2 Computer-based 3 12
3 On-the-job 15 60
4 Self-study 1 4
5 Off-site 4 16
Total 25 100

VIII. HYPOTHESIS TESTING

1. H0: Human resource audit can’t be performed through the measurement of the
effectiveness of the HR functions of an organization.
Ha: Human resource audit can be performed through the measurement of the
effectiveness of the HR functions of an organization.

Calculated-t t- tabulated t-sig Result of Ho

28.504 1.987 .000 reject

One sample t-test was used to test our hypothesis. As Table 1 shows, we found that (calculated
t=28.504), which is greater than tabulated t=1.987. According to our decision rule: Accept Ho if
calculated value is less than tabulated value and reject Ho if calculated value is greater than
tabulated value. So we will reject Ho and accept Ha. So that HR Audit can be performed through
the measurement of the effectiveness of the HR functions of an organization.

2. H0:The Human Resource Management’s climate does not have an impact on employee
motivation, morale and job Satisfaction
Ha: The Human Resource Management’s climate has an impact on employee motivation,
morale and job satisfaction

Calculated-t t- tabulated t-sig Result of Ho

21.643 1.987 0 reject

One sample t-test was used to test hypothesis (#3). Table 3 shows that (calculated=21.643),
which is greater than tabulated t. According to our decision rule: Accept Ho if calculated value is
less than tabulated value and reject H0 if calculated value is greater than tabulated value. So we
will reject Ho and accept Ha. So that The Human Resource Management's climate has an impact
on employee motivation, morale and job satisfaction.

IX. CONCLUSION
A Human Resource audit can be used as a measure to evaluate the personnel activities of an
organization. It gives feedback about the HR functions to operating managers and HR specialists.
It also provides feedback about how well managers are meeting their HR duties. In short, the
audit is an overall quality control check on HR activities in a division or company and an
evaluation of how these activities support the organization’s strategy. HR Audit also gives
feedback HR compliance with the legal provisions and company’s policies. HR audit proved that
HR climate has an impact on employee motivation, morale and job satisfaction.

X. REFERENCE

 Arthur, Jeffrey. "The Link between Business Strategy and Industrial Relations Systems
in American Steel Minimills". Industrial and Labor Relations Review, Vol. 45, No. 4,
1992, pp. 88-506.
 International Public Management Association for Human Resources “Conducting an HR
Audit: How HR Can Better Measure the Effectiveness of its Functions and Programs?”
By Judith Brown, Director of Research.
 Huselid, M.A. (1995). The impact of human resource management practices on
turnover,productivity, and corporate financial Performance. Academy of Management
Journal, 38: 635-672.
 Huselid, M.A., & Becker, B.E. (1995). The Strategic impact of high performance work
systems. Paper presented at the 1995 Academy of Management annual meetings,
Vancouver,BC.
 Huselid,M.A., & Becker, BE. (1996). Methodological issues in cross-sectional and
panelestimates of the HR-firm performance link. Industrial Relations, 35, 400-422.